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Report: Savings Gender Gap Persists; Advisors Can Help Close It

A new study reveals not just a chasm between the retirement readiness of women and men, but also an opportunity for employers and advisors to work together to close that gap.

The Financial Finesse study, “2015 Gender Gap in Financial Wellness,” finds a 26% gap between the median 45-year-old American man and woman when it comes to saving for retirement. While women, on average, earned about $8,000 less than men, the study controlled for that disparity by defining “retirement readiness” as being able to replace 70% of income, plus projected health care costs. However, women tend to live longer and have higher health care costs, which makes an already large gap even more pronounced in practice.

Confidence is Key

The report also highlights a 16% “confidence gap” between the genders when it comes to feeling knowledgeable about saving, and knowing what and how to save. The study shows that more men reported having general investment knowledge (84%, compared with 68% of women), paying off credit cards in full (67% to 50%), and access to an emergency fund (63% to 48%). The report states that closing the gap is “a key to reducing the gender gap in financial wellness.”

Women are more likely to feel more confident about their financial decision when they have done their homework and understand complex terms and choices, according to the report. “Workplace financial education efforts should emphasize hands-on learning that helps change financial behavior and increases financial confidence in order to achieve real world results,” the authors write.

The trends compared to 2012 show that women are increasingly making sound financial decisions, while men regress. The percentage of women who report having made choices that the report defines as being more “financially confident” has risen by 4%, while the percentage of men doing the same has decreased across all seven categories measured.

The study says much of the gain correlates to increased financial education provided by their employer. According to the study, of the employees who completed a financial wellness assessment in 2014, two-thirds were women, an increase of about 16% from 2011.

A Role for Advisors

In that same vein, the report states that women are much more receptive to professional financial advice and argues that employers would be well served to make sure that they receive targeted investment education, particularly early in their careers.

Increased education, the report says, leads to increased confidence, which translates into larger investment accounts down the road. According to a study from the University of Nebraska, which the report cites, both men and women who feel confident about saving are far more likely to set up a personal retirement account, to invest independently, and to take an active role in managing their account balances.

But with just 20% of women in a recent Prudential study saying that the financial services industry “truly understands their needs,” the Financial Finesse study implores advisors to make sure female employees truly trust them, and to take extra care that their guidance is easy to understand.

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